The Multilateral Investment Guarantee Agency (MIGA) is part of the World Bank Group and promotes foreign direct investment in its 157 member countries. To this end, MIGA has provided political risk insurance since its inception in 1988. Initially, MIGA provided insurance to private companies investing in Bank member countries in the form of political risk guarantees, as well as advisory services, capacity building support and mediation service. In this sense, its mandate was to make it less risky for foreign companies to invest in middle and low income countries by hedging potential risks with guarantees. In 2013, MIGA expanded its coverage of non-compliance with financial obligations to include cases where SOEs failed to meet their financial obligations (for example, see Observer Fall 2017).
MIGA is currently headed by its Executive Vice President Hiroshi Matano, who was appointed in November 2019 (see Observer spring 2020). Matano is the latest Japanese national to lead MIGA – Japanese nationals who have served as executive vice president continuously since the organization’s founding. This is a somewhat obscure, but important, footnote to the World Bank and IMF gentlemanly accord – which ensured that the President of the World Bank is an American national and that the Managing Director of the IMF is a European for the duration of the history of the Bretton Woods institutions (see ‘What is the âgentleman’s agreementâ?‘). The United States is MIGA’s largest shareholder, at just over 18 percent, followed by Japan (5.06 percent) and Germany (5.04 percent).
MIGA States that it “can provide insurance coverage for up to 15 years (in some cases 20 years), which can increase the length of loans available to investors.” MIGA also claims that its insurance can reduce project borrowing costs, because “loans guaranteed by MIGA can help lower venture capital ratings of projects.” Beyond political risk insurance, MIGA legal staff provide advice to member states on negotiating bilateral investment treaties and other investment-related matters. The agency can arbitrate disputes between states and investors not guaranteed by MIGA, if the disputes âprevent further investment in the countryâ (see Observer Summer 2021). In such circumstances, MIGA seeks compensation for its mediation services.
MIGA also provides a range of other services. MIGA Small investment program (SIP) is designed to facilitate investments in small and medium-sized businesses involved in the finance, agribusiness, manufacturing and service industries. MIGA too extends its political risk insurance to private equity funds.
In FY19, MIGA issued $ 5.5 billion in guarantees to cross-border private investors, its highest ever; that total fell to $ 3.94 billion in FY20, when the Covid-19 crisis hit. In reply In response to the Covid-19 pandemic, MIGA “launched a $ 6.5 billion fast-track mechanism to help private sector investors and lenders tackle the pandemic in low and middle income countries.” This enabled the issuance of guarantees using simplified and accelerated procedures for various aspects of the health and economic responses of countries to the pandemic. According to MIGA’s FY20 exercise Annual Report, âIn August 2020, MIGA provided US $ 2.6 billion for projects aimed at mitigating the impact of the crisis on emerging markets and developing economies. “
MIGA is increasingly prioritizing work in member countries of the International Development Association (IDA), the World Bank’s concessional lending arm, and in Fragile and Conflict-Affected States (FCS) . According to its FY20 annual report, âDuring FY20, MIGA issued $ 1.7 billion in guarantees in 15 IDA-eligible countries. The agency also issued guarantees in the amount of US $ 495 million in support of projects in three FSC countries: Kosovo, Nigeria and the Solomon Islands. The report continues, “MIGA gross stock in IDA and FCS eligible countries has increased by 13% and 25%, respectively, since FY19”.
Opportunity for improvement: concerns about responsibility and selection of projects
MIGA claims its credentials on environmental and social safeguards, with its website declaring that it “helps investors and lenders ensure that projects comply with what is considered to be the best social and environmental safeguards in the world” ( that is to say the Performance standards, which apply to both MIGA and its sister organization, the International Finance Corporation, the private investment arm of the World Bank). However, a 2019 external review of IFC’s environmental and social responsibility framework, MIGA and their independent accountability mechanism, the Compliance Advisor Ombudsman (CAO), made a number of recommendations highlighting the need for improvement in this area (see Observer Fall 2020). In line with long-standing civil society demands, the review included the recommendation that IFC and MIGA should adopt the principle of ‘contribute to harm, help to remedy’, as they currently lack a mechanism to provide redress to people. communities harmed by IFC-supported projects. or assistance from MIGA. He also proposed that IFC and MIGA actively engage with communities on the ground and assigned them the responsibility of ensuring that clients disclose the availability of CAO to communities affected by the development projects they are supporting. .
Civil society organizations (CSOs) have also criticized MIGA’s guarantees to support fossil fuel projects. Research by UK based E3G CSO show that MIGA had the âdirtiestâ portfolio in terms of support for fossil fuel projects between fiscal years 2014 and 2016 among the four members of the World Bank Group. During fiscal year 16, MIGA did not support any renewable energy project: “[its] energy guarantees stood at $ 1.9 billion in 2016, of which $ 0.9 billion was for fossil fuel projects, âthe remainder going to projects such as hydroelectric dams, which often have significant environmental and social impacts (see Observer spring 2018). The World Bank’s new Climate Change Action Plan notes that MIGA, as well as IFC, will align with the Paris Agreement at a slower pace than the rest of the World Bank Group: 85% of its âreal sector operationsâ will be aligned by July 1, 2023 (i.e. the start of fiscal year 24), with 100% of its real sector operations aligned two years later (see Observer Summer 2021). This has raised concerns from civil society organizations that MIGA continues to provide insurance for non-Paris aligned projects during the interim period.
MIGA has also benefited from IDA’s $ 2.5 billion Private Sector Window (PSW), which was established during the IDA18 replenishment cycle in December 2016. So far, at least 14 projects have received support from the PSW, through the MIGA Guarantee Mechanism. PSW has been criticized for using IDA’s balance sheet to subsidize IFC and MIGA activities.